Investors still running away from stocks

Money continues to flow out of U.S. mutual funds that invest in stocks.

Investors recently dipped a toe back in the stock market, but the water was apparently not fine.

According to the latest report on mutual fund flows from the Investment Company Institute, investors pulled $2.1 billion out of U.S. stock mutual funds during the week ended July 25. That came after modest inflows of $99 million during the prior week.

Overall, investors have been taking money out of domestic stock mutual funds for several months.

Since the beginning of the year, investors have pulled more than $57 billion from U.S. stock mutual funds. By comparison, these funds lost $13.6 billion during the first six months of 2011 and $24.6 billion during the first six months of 2010.

Meanwhile, bond mutual funds continued to attract investors, raking in $5.8 billion in assets during the latest week, compared with the prior week's $6.5 billion inflow.

Hybrid funds, which invest in both stocks and bonds, gained $737 million last week, building on the prior week's $905 million inflow. Taking the middle road has been good for hybrid funds, which have enjoyed inflows for much of 2011.

Investors have been rattled by the debt crisis in Europe, concerns about the fiscal cliff in the United States and a chronic global economic malaise.

But given the latest high-frequency trading fiasco, brought to you exclusively by the wizards at Knight Capital (KCG), the trend is not likely to reverse any time soon.

The New Jersey-based brokerage giant said Thursday that it will face a $440 million loss on erroneous trades it made in nearly 150 stocks on Wednesday.

The costly blunder was apparently the result of a "rogue algorithm" that fired off a volley of buy and sell orders in a matter of minutes that were supposed to be executed over a period of days.

While the episode brought back bad memories of the May 2010 flash crash, the so-called circuit breakers that regulators installed after that unfortunate incident appear to have worked this time around. Still, the mishap illustrates the potential for mayhem when high-frequency trading goes awry.

Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news. Follow Ben on Twitter: @ben_rooney